Blockchain & Cryptocurrency Glossary

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Fungibility

1 min read
Pronunciation
[fung‑uh‑buh‑luh‑tee]
Analogy
Fungibility is like using dollar bills—all $1 bills are treated the same regardless of serial number.
Definition
The property of an asset whereby individual units are interchangeable and indistinguishable in value.
Key Points Intro
Fungibility distinguishes assets via:
Key Points

Interchangeability: Units are identical in function and value.

Divisibility: Can be broken into smaller units without losing value.

Uniformity: No unique identifiers or metadata per unit.

Market liquidity: High fungibility supports easy trading.

Example
Bitcoin is fungible: one BTC is equivalent to another for payment or trading purposes.
Technical Deep Dive
Fungible token contracts (ERC‑20) maintain a single `balances` mapping. There is no per‑token metadata or ID. Transfer functions simply debit and credit balances. Fungibility ensures UTXO or account‑based systems treat units uniformly.
Security Warning
Token tracing (e.g., blacklisting certain units) can compromise fungibility; avoid on‑chain taint tracking for fungible assets.
Caveat
Regulatory blacklisting can introduce non‑fungible behavior in otherwise fungible tokens.
Related Terms
ERC‑20
Token Standard

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